The Stanford Blockchain Club has published a report criticizing the US Department of Justice’s (DOJ) prosecution of Tornado Cash developers Roman Storm and Roman Semenov, claiming it is an overreach of outdated federal money transmission laws. The report, titled “Tornado Cash and the Boundaries of Money Transmission,” argues that the DOJ’s use of 18 U.S.C.
§ 1960, a statute aimed at unlicensed money-transmitting businesses, is inappropriate for charging the developers of Tornado Cash, a decentralized Ethereum-based protocol. The DOJ’s 2023 indictment labeled Tornado Cash an “unlicensed money transmitting business” for enabling users to anonymize crypto transactions.
The club argues that the statute, written before the advent of blockchain technology, fails to address the nuances of decentralized protocols like Tornado Cash, which operate through immutable smart contracts without intermediaries or custodians. The report highlights the constitutional implications of using executive enforcement to regulate emerging technologies, warning that such actions circumvent the democratic process and risk stifling innovation by conflating legal use cases of privacy-preserving tools with illicit activity.
The Tornado Cash case is a growing debate about financial privacy and the risk of misuse by bad actors.
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